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Improving economics, more rapid convergence and continuing structural challenges are likely to stimulate M&A activity in the media sector in 2014, predicts KPMG.

According to the leading industry analyst, during the first three-quarters of 2013 the sector saw a total of 854 completed transactions globally, with a total value of $27.6 billion. This meant that deal activity fell compared with the first three-quarters of the previous year which saw a total number of 933 deals worldwide at a value of $46.08 billion.

Yet, suggested David Elms, head of nedia at KPMG, there is now a ‘pent-up demand’ for M&A activity in the sector which is likely to trigger more and bigger deals next year. “The pace of change across the media sector is now so rapid that many businesses cannot adapt through a natural process of evolution – creating a market-leading proposition organically is becoming more difficult; companies need to make bold changes in strategy. Together these factors will mean that, in 2014, businesses that have been following a ‘wait and see’ position on M&A, are likely to have to act or get left behind.”

Looking as to where he saw the source of business activity, Elms pinpointed the search for original TV content among newer, but maturing, TV content providers such as over-the-top (OTT) leaders Netflix and Hulu as acting as a catalyst for M&A activity.

“Many of these businesses are moving from offering ‘secondary’ content – TV content and films which have previously been broadcast – to offering ‘primary’ content to secure a competitive advantage,” added Elms. “This could result in these TV content providers acquiring producers of content. Furthermore, this strategy could lead to a convergence between businesses in other parts of the media sector including radio and print media …This type of content-focused convergence is driven by a desire to create sophisticated communities of customers. Targeting such communities is not a new concept, but technology is making it an increasingly achievable ambition.”

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